The latest peace offer from Musk is the culmination of months of legal threats between Twitter Inc. and Tesla’s Elon Musk over the buyout of the social media platform. In a letter to Twitter Inc., the wealthiest man in the world said that he would go ahead with the deal after all. He also wants to honor the $44 billion original price tag for the company he had agreed to in April, along with other terms and conditions in the contract.
The shares of Twitter rose more than 20% Tuesday, signaling investors expect the deal to go through now. However, Twitter stopped short of dropping the legal suit it filed that forced Musk to complete the deal, a trial set to commence in less than two weeks.
Twitter Inc. has not yet declared victory and has a good reason to remain cautious. They need to get the money before shutting down its legal option; even though Musk has the financial commitment from banks for the deal, which they may regret as it was given during a better economic time, the trust with Twitter is lacking.
When Musk was on good terms with Twitter in April, he was ready to join the board. CEO of Twitter, Parag Agrawal, had put his face on Twitter’s investor page and asked him to join the weekly Q&A session with employees. Musk backed out and was frustrated after Agrawal told him his negative public speeches made it difficult for employees to focus. Musk had told Agrawal he was not joining the board as it was a waste of time and intended to make Twitter private.
Musk had offered to buy out Twitter with friendly terms in taking it or leaving it a letter without due diligence. After Twitter accepted the offer, within weeks, Musk made fun of the management, questioned the number of users of the social network platform, saying they were calculated fraudulently with many bot accounts, and tried to unwind from his commitments.
Twitter Inc. sued Musk to complete the transaction even as Musk filed new claims saying that Twitter was not providing information for the deal to go ahead and the fake accounts degraded the company’s value.
Legal Threats
Surprised, Musk offered to return to the deal’s original terms with a provision that the trial and all other proceedings are stopped in the Delaware Chancery Court. The threat of close contact of Musk being asked to depose or Musk himself in the court will open plenty of private conversations, which could be embarrassing to Musk. Many pre-trial rulings were not going Musk’s way and indicated more difficulties in court when the trial began.
Musk’s letter mentioned that he could sue Twitter if the deal was not resolved “immediately.” The potential outcome is still unclear, with the judge not yet granting a stay in the case. Even if the deal happens, Agrawal will not stay, given his past exchanges with Musk. Twitter shareholders will gain from the original deal as most social media stocks have slumped since April while the employees remain in limbo.
